The combined profit of 16 private sector banks for the July-September quarter was 367.5% higher, or nearly four times, that of 23 state-owned lenders, data from digital corporate database Capitaline showed.
With Rs 2,218.42 crore in profit, as against Rs 10,478.41 crore clocked by their private-sector peers, the public sector banks (PSBs), nevertheless, looked better than they did in the quarter ended June, when they had reported a net loss of Rs 1,251.36 crore, compared to their private peers’ aggregate profit figure of Rs 10,291.28 crore.
In the quarter ended September 2015, private-sector lenders’ aggregate profit was 53% higher than that of the PSBs.
The banks’ profitability suffered as a 151% rise in provisions outweighed the impact of a 79% growth in net interest income, or the difference between interest earned on loans and that expended on deposits.
The overall profitability picture for PSBs was salvaged by the State Bank of India (SBI), which alone accounted for Rs 2,538.32 crore of profit, even as the figure marked a 34.5% climbdown year-on-year (y-o-y). The aggregate figure is lower than the state-owned behemoth’s profit as seven smaller peers, including SBI’s associates, registered losses.
Of the PSBs that have declared their earnings so far, Bank of Baroda, Indian Overseas Bank, Indian Bank, Bank of India and Vijaya Bank have bucked the trend of a drop in profitability.
While private sector lenders outperformed their public sector peers, their own profit growth was a little over 1% on a y-o-y basis and 1.8% sequentially. The worst performer on this count was Axis Bank, which saw a nearly 80% year-on-year drop in the net profit on account of a 412% jump in provisions.
Banks accelerated the process of recognising bad loans on their books after the Reserve Bank of India had begun its asset quality review in the October-December quarter. ICICI Bank saw its provisions rising by 652% y-o-y. The bank was able to post a profit at the operating level because of sale of a 6% stake in its life insurance subsidiary and higher treasury gains and investment income.
HDFC Bank, which saw a 20.4% growth in the net profit, owed the improvement to lower costs rather than high loan growth. In a note dated October 25, investment bank Jefferies wrote, “HDFC Bank reported a muted quarter where the growth and margins both came below our estimates. Lower operating and provisioning cost helped the company to meet the botto mline expectations.” Jefferies expects the bottom line to pick up in the next fiscal.